* Canadian dollar rises 0.2 percent against the greenback
* Price of U.S. oil advances 0.9 percent
* Canadian bond prices dip across much of the yield curve
By Fergal Smith
TORONTO, Feb 19 (Reuters) - The Canadian dollar rallied to its highest level in nearly a week against a broadly weaker greenback on Tuesday, as oil prices rose and investors bet on a breakthrough in trade talks between the United States and China.
Optimism that a new round of talks between China and the United States would help resolve their trade conflict triggered selling of the safe-haven U.S. dollar .DXY , which fell against a basket of major currencies. seems to be a risk-on event," said Rahim Madhavji, president at Knightsbridge Foreign Exchange. "There are some rumors going around that there's some potential breakthrough in terms of talks with China."
Canada is a major producer of commodities, including oil, so its economy could benefit from improved prospects for global trade.
U.S. crude oil futures CLc1 settled 0.9 percent higher at $56.09 a barrel, boosted by tightening supplies, while U.S. stocks extended last week's rally. 3:05 p.m. (2005 GMT), the Canadian dollar CAD=D4 was trading 0.2 percent higher at 1.3210 to the greenback, or 75.70 U.S. cents. The currency touched its strongest intraday level since Feb. 13 at 1.3207.
Gains for the loonie come ahead of a speech on Thursday by Bank of Canada Governor Stephen Poloz. He is due to speak in Montreal on monetary policy.
Money markets expect the Bank of Canada to keep interest rates on hold over the coming months after the central bank said in January that low oil prices, which have led to production cuts in Alberta, and a weak housing market, harmed the economy in the fourth quarter of 2018 and would continue to do so in the first quarter of this year. retail sales data for December is due on Friday.
Canadian government bond prices edged lower across much of the yield curve, with the two-year CA2YT=RR down 0.5 Canadian cent to yield 1.779 percent and the 10-year CA10YT=RR falling 5 Canadian cents to yield 1.901 percent.